Correlation Between Addus HomeCare and Richter Gedeon

Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and Richter Gedeon at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Addus HomeCare and Richter Gedeon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Addus HomeCare and Richter Gedeon Vegyszeti, you can compare the effects of market volatilities on Addus HomeCare and Richter Gedeon and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Addus HomeCare with a short position of Richter Gedeon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and Richter Gedeon.

Diversification Opportunities for Addus HomeCare and Richter Gedeon

-0.4

Correlation Coefficient

Addus HomeCare  Richter Gedeon

Very good diversification

The 3 months correlation between Addus and Richter is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and Richter Gedeon Vegyszeti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richter Gedeon Vegyszeti and Addus HomeCare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Addus HomeCare are associated (or correlated) with Richter Gedeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richter Gedeon Vegyszeti has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and Richter Gedeon go up and down completely randomly.

Pair Corralation between Addus HomeCare and Richter Gedeon

Assuming the 90 days horizon Addus HomeCare is expected to under-perform the Richter Gedeon. In addition to that, Addus HomeCare is 1.52 times more volatile than Richter Gedeon Vegyszeti. It trades about -0.2 of its total potential returns per unit of risk. Richter Gedeon Vegyszeti is currently generating about 0.07 per unit of volatility. If you would invest  2,494  in Richter Gedeon Vegyszeti on December 29, 2024 and sell it today you would earn a total of  156.00  from holding Richter Gedeon Vegyszeti or generate 6.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Addus HomeCare  vs.  Richter Gedeon Vegyszeti

Addus HomeCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Addus HomeCare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Richter Gedeon Vegyszeti

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Richter Gedeon Vegyszeti are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Richter Gedeon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Addus HomeCare and Richter Gedeon

The main advantage of trading using opposite Addus HomeCare and Richter Gedeon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, Richter Gedeon can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Richter Gedeon will offset losses from the drop in Richter Gedeon's long position.

The idea behind Addus HomeCare and Richter Gedeon Vegyszeti pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.